#08 - Unlocking the Potential of REITs

This week Toyota dropped some big news on new R&D, Birkenstocks and Ethereum are having a good month, and why you should look into REITs as an alternative investment option.

Big 3 Market/News Topics

• Toyota $TM Doubles Down on Hybrid Over EV

  • This week there was an event that unveiled their latest fuel-based technology to be used alongside batteries in hybrid vehicles

  • Since sales of fully electric cars have slowed due to concerns about costs and insufficient charging networks hybrid engines have continued to gain market share and will increase R&D into future options

  • Mazda, Subaru, and Toyota are planning to partner to share information on their engine developments. The results of their collaboration will be yet to see, but it's obvious neither of them see internal-combustion engines going away.

• Birkenstock $BIRK is Still a Thriving & Growing Footwear Brand

  • Contrary to what fashion experts say Birks are still in & thriving as their stock price bumped up 10-12% on Thursday during their Q1 earnings release.

  • $BIRK has revised its FY2024 revenue forecast to EUR 1.77-1.78 billion, compared to the consensus estimate of EUR 1.75 billion.

  • The new revenue forecast projects year-over-year growth of 20% up from the previous guidance range of 17%-18%.

• SEC Approves Spot Ethereum $ETH ETF

  • Ethereum is a decentralized blockchain with the native cryptocurrency “Ethereum” is among the largest cryptocurrencies in the world second only to Bitcoin in terms of market cap.

  • Early approval happened in the past week for eight Ether ETFs, but they won't start trading until the agency approves their S-1 filings. That process could take several months.

  • The Ether ETFs might not attract as many investors as the Bitcoin ETFs, but they might represent an easy way for investors to gain exposure to Ether without directly buying the coins.

  • Ethereum is trading up over 25% over the past month and almost 100% YOY.

The Freedom Fund Update

This week and in future weeks you will notice I am shooting to buy ~60% of my weekly purchases into index based ETFs such as $SCHB, $SCHD, $BCX. Investing $100-$200 a week into ETF’s or individual stocks you sometimes need to get creative with your buys based on cash available. Over time the Freedom Fund will eventually be comprised of 60% index based ETF’s vs. 40% specific company or REIT holdings.

• 5/31 - Friday Freedom Fund Purchase:

  • 2 shares of $SCHB - Schwab US Broad Market ETF

  • 1 share of $SHOP - Shopify Inc

  • 2 shares of $BCX - Blackrock Resources & Commodities Strategy Trust

Freedom Fund Background: I created the Freedom Fund as a public brokerage account back in October of 2022 to share that anyone with a social security # and a bank account can begin their investing journey by investing a couple hundred dollars a week. Every week and month I post on X (@GrahamInvesting) public updates about the purchases, exits, dividends, and growth of the fund if you want to follow in real time. The biggest obstacle people have to investing is just getting started so I decided to start a new account at $0 to start from nothing with you.

Investment Insights: Understanding REITs

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income properties across a range of sectors. Established by Congress in 1960 (Eisenhower Paved the Way for REIT Investors to Enjoy Durable Dividends) , REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership, without actually having to buy, manage, or finance any properties themselves. So if you have rental property FOMO check out REITs to get started saving for a physical property one day.

Main Types of REITs:

• Equity REITs: These own and operate income-generating real estate. They generate revenue primarily through leasing space and collecting rents on the properties they own.

• Mortgage REITs (mREITs): These provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities. They earn income from the interest on these financial assets.

• Hybrid REITs: These combine the investment strategies of both equity REITs and mortgage REITs, owning properties and holding mortgages.

REITs Can Provide:

1. Diversification: Investing in REITs allows individuals to diversify their portfolios beyond the traditional asset classes of stocks and bonds. This diversification can help mitigate risk, as real estate often behaves differently from other types of investments during various economic cycles.

2. Stable Income: One of the most attractive features of REITs is their potential to provide regular income. By law, REITs must distribute at least 90% of their taxable income to shareholders in the form of dividends. This requirement often results in relatively high and consistent dividend yields.

3. Liquidity: Unlike direct real estate investments, which can be difficult and time-consuming to sell, publicly traded REITs are bought and sold on major stock exchanges. This allows investors to easily enter and exit their positions without the long waiting periods typically associated with real estate transactions.

4. Professional Management: REITs are managed by firms with experience in the RE market. This means that investors benefit from the experience of seasoned managers who oversee the acquisition, development, and management of properties.

5. Potential for Capital Appreciation: In addition to dividend income, REITs have the potential for capital appreciation. As the value of the properties owned by a REIT increases, so can the value of the REIT shares. This can result in capital gains for investors over time.

6. Inflation Hedge: Real estate has historically been an effective hedge against inflation. As inflation rises, property values and rental income tend to increase, which can help preserve the purchasing power of the investor’s capital.

7. The Freedom Fund currently has positions in the following 4 REITs that all pay monthly dividends:

   1. ($O) Realty Income - General commercial real estate properties.

   2. ($APLE) Apple Hospitality - Hotel & hospitality properties.

   3. ($LAND) Gladstone Land Corp - Farmland properties.

   4. ($MDV) Modiv Industrial - All industrial manufacturing properties.

REITs represent a great alternative investment that combines the benefits of real estate ownership with the accessibility and liquidity of stock market investments. Whether you're looking for income, diversification, or a hedge against inflation, REITs can be a valuable addition to your investment portfolio.

The purpose of Graham’s Gazette and my social account @GrahamInvesting is to help others get started and stay consistent on their own personal, professional, and financial journey. I appreciate the time you take in reading & interacting with me and look forward to growing together.

Thanks for investing your time reading this.

-Graham (@GrahamInvesting)

Disclaimer: Graham’s Gazette provides information and resources related to investing, financial topics, and personal growth for educational and entertainment purposes only. The content presented is not intended to be construed as financial advice. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial decisions. Graham’s Gazette and its creators do not assume any responsibility for the accuracy or completeness of the information provided nor do they guarantee any specific results from such use of information.